SAFRAN SEPTEMBER 2020 KEPLER CHEUVREUX VIRTUAL AUTUMN CONFERENCE
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SAFRAN
SEPTEMBER 2020
KEPLER CHEUVREUX
VIRTUAL AUTUMN CONFERENCE
Bernard DELPIT – Group CFO
1 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authorization of Safran
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Disclaimer
> FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements relating to Safran, which do not refer to historical facts but refer to expectations based on management’s current views and assumptions and
involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those included in such statements. These statements or
disclosures may discuss goals, intentions and expectations as to future trends, synergies, value accretions, plans, events, results of operations or financial condition, or state other information
relating to Safran, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be
accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “would,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other
similar words, phrases or expressions. Many of these risks and uncertainties relate to factors that are beyond Safran’s control. Therefore, investors and shareholders should not place undue reliance
on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: uncertainties related in particular to the
economic, financial, competitive, tax or regulatory environment; the risks that the new businesses will not be integrated successfully or that the combined company will not realize estimated cost
savings and synergies; Safran’s ability to successfully implement and complete its plans and strategies and to meet its targets; the benefits from Safran’s plans and strategies being less than
anticipated; the risks described in the Universal Registration Document (URD); the full impact of the outbreak of the COVID-19 disease.
The foregoing list of factors is not exhaustive. Forward-looking statements speak only as of the date they are made. Safran does not assume any obligation to update any public information or
forward-looking statement in this document to reflect events or circumstances after the date of this document, except as may be required by applicable laws.
> USE OF NON-GAAP FINANCIAL INFORMATION
This document contains supplemental non-GAAP financial information. Readers are cautioned that these measures are unaudited and not directly reflected in the Group’s financial statements as
prepared under International Financial Reporting Standards and should not be considered as a substitute for GAAP financial measures. In addition, such non-GAAP financial measures may not be
comparable to similarly titled information from other companies.
> DEFINITION
Civil aftermarket (expressed in USD): This non-accounting indicator (non-audited) comprises spares and MRO (Maintenance, Repair & Overhaul) revenue for all civil aircraft engines for Safran
Aircraft Engines and its subsidiaries and reflects the Group’s performance in civil aircraft engines aftermarket compared to the market.
2 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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SUMMARY
1. SAFRAN RESPONSES TO THE CRISIS
2. ADAPTATION PLAN OBJECTIVES
AND H1 2020 ACHIEVEMENTS
3. 2020 OUTLOOK
4. KEY TAKEAWAYS
3 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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1. Context : an unprecedented crisis in an already challenging environment
Background:
> Since 2015, operating margin of the legacy Equipment division improved by at least 100bps per year
> Since end of 2018, integration of former Zodiac activities in Safran Group
> Continuous grounding of the 737 MAX from March 2019
> Structural over capacity of the wideboby market
New IATA estimates (as of September 1, 2020):
> July air traffic improving slowly
RPK down by (79,8)% in July against (86,6)% in June
ASK down by (70.1)% in July against (80.1)% in June
> RPK for FY2020 downgraded late July to (63)% compared to 2019 (versus (54.7)% forecasted at the beginning of June)
> The recovery in short haul travel is still expected to happen faster than for long haul travel
CFM56 and LEAP flight cycles are improving, driven by China, North America and Europe.
As of August 23, 2020 :
> Weekly CFM56 fleet cycles are down (46)% yoy (vs down (83)% at trough in April)
> Weekly LEAP fleet cycles are down (17)% yoy (vs down (76)% at trough in April)
4 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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1. Safran responses : resizing workforce, rationalizing industrial footprint and
supporting supply chain
Actions taken are quick and significant
> Timely response allows for results to materialize as soon as H1 2020
Resizing the workforce to the needs of the business
> Reduction by more than 15,000 people of permanent and temporary workers, on a worldwide basis at the end of July.
> In France, a Group “Activity Transformation” agreement reached in July 2020 with all unions : the rationale is to keep
people in the Group to prepare the future ramp up with an enhanced competitiveness.
Industrial footprint rationalization and more to come
> 4 sites closure in Seats (UK, US), Cabin (US) and Electrical & Power (US) activities
> 3 transfers of production notably in Cabin and Electrical & Power activities
> ~10 restructuring plans
Supply chain monitoring
> Task force in place to identify and support critical suppliers
> Restructuring announced by some suppliers
> Safran will contribute €58M equity support through the dedicated fund announced by the French government
5 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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2. Adaptation plan objectives and H1 2020 achievements
Adaptation plan objectives H1 2020 achievements
> decrease by more than (30)% of raw materials and
supplies expenses
Scaling purchasing programs in line with the drop
in activity > decrease by more than (40)% of sub-contracting
expenses
work-in-progress and inventories are stabilizing
Adapting Capex commitments by (60)% in 2020 > reduction of (74)%, above the initial objective
compared to 2019
Lowering R&D expenses by (30)% in 2020 > reduction of (31)%, in line with the objective
compared to 2019
Cutting Operating expenses(1) at year end by more > reduction of (17)%, consistent with the year-end target
than (20)% compared to 2019
(1) Excluding purchasing and including R&D expenses
6 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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2. Resilience in H1 2020 thanks to strong execution
Adjusted revenue(1) Adjusted recurring operating income(1) Free cash flow generation
12,102 1,883 1,177
(23.4)%
901
(27.6)% (49.7)%
8,767 947
(54.4)%
(29.0)% org
org
(€M) (€M) (€M)
H1 19 H1 20 H1 19 H1 20 H1 19 H1 20
Adjusted net profit(1) (group share) Basic earnings per share (group share)
3.13 Net debt position
1,353
(€M)
(62.3)%
(63.0)%
501 1.18
(3,082)
(4,114)
(€M) (€) 12/31/2019 06/30/2020
H1 19 H1 20 H1 19 H1 20
(1) Adjusted data : see H1 2020 earnings presentation for consolidated figures
7 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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3. FY 2020 outlook (disclosed on July 30)
Lot of uncertainties
Adjusted revenue to decrease by approximately (35)% at an estimated average spot rate of USD
1.10 to the Euro. Similar variation in organic terms;
Recurring operating margin around 10% of sales based on a hedged rate of USD 1.16 to the Euro;
Positive free cash flow generation in H2, despite strong uncertainties regarding working capital
evolution.
8 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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3. FY 2020 key assumptions
Implementation of the adaptation plan within the
Assumptions within all the divisions
whole Group
Propulsion: Deployment of HR measures of the adaptation plan:
> Decrease in deliveries and return to service of the 737 MAX in Q4 as Same effort in terms of labor costs for France and International
announced by Boeing Workforce reduction internationally already done in H1
> LEAP engines : deliveries ~ 800 in 2020 “Group Activity Transformation” agreement reached in France
> Military engines: deliveries decrease compared to 2019 unchanged with positive financial impacts to materialize from H2-20
from forecasts at the start of the year
> Civil aftermarket: ~ (50)% for FY2020 Objective to save 30% of labor costs, consistent with the
decrease of activity
Aircraft Equipment, Defense and Aerosystems:
> Lower quantities announced by airframers to be delivered in H2 on the Decrease in R&D expenses by around Euro 450 million compared to
main widebody programs, organic decrease in sales is expected to 2019;
be greater in H2 than in H1
> Recurring operating margin in H2 improving compared to H1 due to
Level of Capex outflows down by Euro 200 million between 2019 and
adaptation plan ramp-up
2020 reflecting the confirmed reduction in commitments of 60%
compared to 2019.
Aircraft Interiors:
> Very low level of retrofit activities for airlines in H2, organic decrease in
sales is expected to be stronger in H2 than in H1
> Recurring operating income significantly improving in H2 compared
to H1 due to savings and restructuring. Strong negative recurring
operating margin over the year.
9 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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4. Key takeaways: quick and proactive approach to adapt Safran
As uncertainties remain, flexibility is key
Safran is significantly reducing its costs and lowering its breakeven point to benefit from the recovery when
it occurs
First impacts from the adaptation plan already in H1 2020 : workforce resizing, furlough schemes, industrial footprint
adaptation, reduction of operating expenses (including R&D expenses), reduction of Capex commitments
A significant Group “Activity Transformation” agreement reached with all unions in France that will impact positively as soon
as H2 2020
A gradual recovery is the central scenario with air traffic expected to go back to 2019 levels by 2023-2024
New aircraft deliveries are expected to be lower for a period of time, exceeding 2020
Services (notably civil aftermarket) and aircraft interiors activities strongly affected in 2020
LT Prospects remain good for Safran
Civil aftermarket, expected to recover faster than OE and CFM56 fleet remains a key asset
Narrowbody, short haul routes being less impacted than international routes
Safran reinforce its commitment and actions to address the climate change challenge. Government support
will allow Safran to maintain a high level of R&T activity in the next years, offsetting most of the decrease in
its self-funded expenses over next years due to the crisis.
10 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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Q&A
11 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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12 Virtual Kepler Cheuvreux Autumn Conference / September 9, 2020
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